How to Choose Between a Car Warranty and Car Insurance

If you have to choose between a car warranty and car insurance, you need to understand a car warranty, car insurance, and the specifics of your case.

September 15, 2017 ·

by Nicholas Wilson

While car warranty and car insurance sound very similar, the reality is that they are very different and protect your car in different ways. Understanding exactly how they differ and exactly what kind of protection you’ll have by choosing either one of them is essential to the choice between a car warranty and car insurance. By knowing a little more about each of these things, you’ll be in a far better position going forward.

In this article, Part 1 explains a car warranty, Part 2 outlines car insurance, and Part 3 helps you decide what option is best for you.

Part 1 of 3: What it means to have a car warranty

Step 1: Understand car warranties. The principles that apply to a car warranty are no different than those that apply to any other type of warranty.

Basically, the idea is that your car is protected against mechanical defects as specified in the terms of the warranty. Generally, new cars come with a manufacturer’s warranty that extends for a certain period of time or miles. The term of these warranties differs. Often, this sort of warranty is built into the price of the car.

Items covered include electronics and engine components, but parts like tires or wipers are generally not.

You can also purchase an auto warranty. By doing this, you are paying extra to safeguard your investment against mechanical defects. What exactly is covered and under what conditions these things are covered depend on particular details in your warranty agreement, so be sure you know what you are getting into before you pay.

Part 2 of 3: The basics of car insurance

Step 1: Understand what it means to have car insurance. Some form of car insurance is usually required by law in most states.

Car insurance comes in two basic packages: liability and comprehensive. Liability insurance covers any damages you cause to another driver because of an accident for which you are to blame, but does not cover any damages to your vehicle.

Comprehensive coverage, on the other hand, includes liability coverage and also covers the damages to your vehicle. There are monetary limits to the amount of coverage you have, and each plan is different. Further, most plans have deductibles that need to be met before insurance kicks in.

Part 3 of 3: How to make the best decision for your situation

Step 1: Evaluate your situation. As with any decision, you should try to take every factor into account before moving forward.

The reality is that deciding between car insurance and a car warranty is probably not an “either/or” but more of a “both/and,” meaning that, because they cover your car in different ways, you are trying to decide what level of total protection you need.

So, if your car is brand new, then you probably have a manufacturer’s warranty and are probably required by law to have liability insurance, in which case your main decision is whether you need comprehensive coverage. The answer, because you probably still owe on the car, is yes.

Another case may be where you don’t have a warranty and only have the minimum liability coverage. A warranty might protect you against mechanical failures, but it is not going to help you if you hit a deer, so extra insurance would be needed for that.

Step 2: Match your needs to your protection. Maybe your biggest worry is mechanical, maybe it is other drivers, or maybe a combination of both.

Match these worries and needs to your coverage, and you’ll end up at a comfortable level of total protection.

With the countless options out there relating to cars, you can at least rest easy knowing you have solved the dilemma of choosing between a car warranty and car insurance. The issue is not terribly complex, and with a little legwork on your end, you can decide what path to choose going forward.